Sep 4, 2026 · 21 min
Mortgage spreads hold the key to housing’s next move
Can mortgage spreads get worse from here?
The gap between Treasury yields and mortgage rates could determine whether borrowing costs rise further or move closer to 6%, with direct consequences for housing activity.
- 1Mortgage spreads, not just Treasury yields, are currently the main constraint keeping mortgage rates from rising further.
- 2The Silicon Valley Bank crisis pushed spreads above 3% as banking stress and emergency Federal Reserve action disrupted markets.
- 3Improved spreads could bring mortgage rates closer to 6% and help revive housing sales and activity.
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Logan Mohtashami uses the Silicon Valley Bank crisis to show how quickly banking stress and Federal Reserve intervention can push mortgage spreads above 3%.
The brief
Sarah Wheeler and Logan Mohtashami examine whether mortgage spreads could widen further, testing how geopolitical uncertainty, oil prices, and Fed policy might affect mortgage rates.
The central argument is that mortgage spreads—not Treasury yields alone—are holding rates back, and better spreads could move borrowing costs closer to 6%.
Logan explains spreads through the relationship between 10-year Treasury yields and 30-year mortgage rates, which can move together while separating by varying amounts.
The Silicon Valley Bank crisis offers the clearest warning: banking stress and emergency Federal Reserve action pushed mortgage spreads above 3%, an unusually high level.
The episode’s practical takeaway is that spread improvement could support housing activity, while renewed widening would keep mortgage rates elevated even without a Treasury shock.
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